Management advisory services Overview Practice Questions

Overview Practice Questions Management advisory services 1. The primary purpose of management advisory services is to A. conduct special studies, preparation of recommendations, development of plans and programs, and provision of advice and assistance in their implementation. B. provide services or to fulfill some social need. C. improve the client's use of its capabilities and resources to achieve the objectives of the organization. D. earn the best rate of return on resources entrusted to its care with safety of investment being taken into account and consistent with the firm's social and legal responsibilities. 1. The following characterize management advisory services except A. involve decision for the future B. broader in scope and varied in nature C. utilize more junior staff than senior members of the firm D. relate to specific problems where expert help is required 2. Which of the following is not classifiable as a management advisory service by CPA? A. Systems design. C. Make or buy analysis. B. Project feasibility study. D. Assistance in budget preparation. 2. Which of the following statement is false? A. CPA’s provide management services to go around the ethical constraints as mandated by the Accountancy Act. B. Businesses hire management consultants to help define specific problems and develop solutions C. Included in the practice of consulting is the provision of confidential service in which the identity of the client is concealed D. CPA’s performing management services may be considered to be in the practice of management consulting Management accounting & financial accounting 1. Which of the following characteristics is inherent to management accounting? A. Reporting of historical information B. Compliance to generally accepted accounting principles C. Contribution approach income statement D. External users of financial report 3. The following are characteristics of financial accounting, except? A. Reporting of historical information B. Compliance to generally accepted accounting principles C. Contribution approach income statement D. External users of financial report 4 The following are inherent to either management accounting or financial accounting: 1. External report 2. Historical information 3. Contribution approach income statement 4. Generally accepted accounting principles 5. Prospective financial statements Which of the foregoing are related to management accounting and financial accounting respectively? A. B. C. D. Management 1, 2, 5 3, 5 2, 3 3 Accounting Financial Accounting 3, 4 1, 2, 4 1, 4, 5 1, 2, 4, 5 5. The costing method that is properly classified for both external and internal repotting purposes is A. Activity-based costing External reporting Internal reporting Yes Yes B. Variable costing Yes No C. Process costing No Yes D. Standard costing Yes No Quality Costs 6. The cost of statistical quality control in a product quality cost system is A. training cost C. appraisal cost B. internal failure cost D. prevention cost Activity-based Costing 7. The last step in activity-based costing is to A. identity the major activities that pertain to the manufacture of specific products B. allocate manufacturing overhead costs to activity cost pools C. Identify the cost drivers that accurately measure each activity’s contribution to the finished product D. Assign manufacturing overhead costs for each activity cost pool to products 8. Designing and redesigning are activities that are classified as A. Facility level C. Unit level B. Batch level D. Product level 9. The examples of activities at the product level include A. scheduling, setting up, and moving C. heating, lighting, and security B. designing, changing, and advertising D. cutting, painting, and packaging 1. Examples of activities at the batch level of costs include A. scheduling, setting up, and moving C. heating, lighting, and security B. designing, changing, and advertising D. cutting, painting, and packaging 2. Scheduling, setting up, and moving are examples of activities that are classified as A. Batch level C. Unit level B. Product level D. Facility level 10. Examples of unit level activities are A. scheduling, setting up, and receiving C. heating, lighting, and security B. designing, changing, and advertising D. cutting, painting, and packaging 3. An example of a nonvolume-related overhead base would be: A. Direct materials cost C. Direct Labor cost B. Machine hours D. Number of inspections 11. Classify the following as volume (unit) base or non-volume (activity) base: 1. Number of purchase orders issued 2. Direct labor hours 3. Number of machine hours 4. Number of set ups 5. Number of receiving reports issued 6. Direct material cost A. B. C. D. Volume (Unit) Base 1, 4, 5, 6 1, 4, 5 1, 2, 3, 4, 5 2, 3, 6 Non-volume (Activity) 2, 3 2, 3, 6 6 1, 4, 5 Base 12. McMd's standard cost card indicates that it takes three hours of direct labor to produce one unit of product. A recently conducted time and motion study revealed that it should take one hour to produce the same unit. Labor cost is P150 per hour. McMd's value-added, and non value-added costs would be A. P150 and P0 C. P150 and P300 B. P0 and P150 D. P450 and P0 13. Moon Company makes two products, Alpha and Beta. Alpha is being introduced this period, whereas Beta has been in production for 2 years. For the period about to begin, 1,000 units of each product are to be manufactured. The only relevant overhead item is the cost of engineering change orders. Alpha and Beta are expected to require eight and two change orders, respectively. Alpha and Beta are expected to require 2 and 3 machine hours, respectively. The cost of a change order is P600. If Moon is using direct tracing, the amount of overhead per unit that will be assigned to Alpha and Beta, respectively, are A. P2.40 and P3.60, respectively C. P4.80 and P1.20, respectively B. P3.60 and P2.40, respectively D. P1.20 and P4.80, respectively Just-in-Time Manufacturing System 14. Which of the following is not a typical characteristic of a just-in-time (JIT) production environment? A. Lot sizes equal to one C. Push-through system B. Insignificant set up times and costs D. Balanced and level workloads Cost Behavior Variable Costs 6. Total production costs for Jordan, Inc. are budgeted at P2,300,000 for 50,000 units of budgeted output and P2,800,000 for 60,000 units of budgeted output. Because of the need for additional facilities, budgeted fixed costs for 60,000 units are 25 percent more than budgeted fixed costs for 50,000 units. How much is Jordan’s budgeted variable cost per unit of output? A. P 7.50 C. P30.00 B. P16.00 D. P62.50 15.Total production costs for Carera, Inc. are budgeted at P230,000 for 50,000 units of budgeted output and P280,000 for 60,000 units of budgeted output. Because of the need for additional facilities, budgeted fixed costs for 60,000 units are 25% more than budgeted fixed costs for P50,000 units. How much is Carera’s budgeted variable cost per unit of output? A. P1.60 C. P3.00 B. P1.67 D. P5.00 3. Total production costs for Laguna, Inc. are budgeted at P230,000 for 50,000 units of budgeted output and P280,000 for 60,000 units of budgeted output. Because of the need for additional facilities, budgeted fixed costs for 60,000 units are 25% more than budgeted fixed costs for 50,000 units. How much is Laguna’s total budgeted variable cost at 60,000 units? A. P96,000 C. P180,000 B. P100,200 D. P100,000 16.Mulvey Company derived the following cost relationship from a regression analysis of its monthly manufacturing overhead cost: C = P80,000 + P12M Where C = monthly manufacturing overhead cost M = machine hours The standard error of the estimate of the regression is P6,000. The standard time required to manufacture one six-unit case of Mulvey's angle product is 4 machine hours. Mulvey applies manufacturing overhead to production on the basis of machine hours and its normal annual production is 50,000 cases Mulvey's estimated variable manufacturing overhead cost for a month in which scheduled production is 5,000 cases would be A. P80,000 C. P240,000 B. P320,000 D. P360,000 1. Which of the following graphs illustrates the behavior of a total variable cost? (E) Graph 1 Graph 2 Total units produced Total units produced Graph 3 Graph 4 Total units produces Total units produced A. Graph 2 C. Graph 4 B. Graph 3 D. Graph 1 Fixed Costs 9. Parts Company wishes to determine the fixed portion of its maintenance expense (a semi-variable expense), as measured against direct labor hours for the first three months of the year. The inspection costs are fixed; the adjustments necessitated by errors found during inspection account for the variable portion of the maintenance costs. Information for the first quarter is as follows: Direct Labor Hours Maintenance Costs January 34,000 P61,000 February 31,000 58,500